Key Points
Earlier this year, the Supreme Court ruled that President Donald Trump’s broad tariffs imposed under the International Emergency Economic Powers Act (IEEPA) exceeded the authority granted by Congress. If that ruling ultimately stands, economists at the Penn Wharton Budget Model estimate U.S. businesses could receive as much as $175 billion in tariff refunds.
For import-heavy retailers, this could become a meaningful tailwind.
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Where the biggest winners could emerge
Companies such as Walmart (NASDAQ: WMT), Costco (NASDAQ: COST), and Target (NYSE: TGT) import billions of dollars’ worth of merchandise every year, from electronics and appliances to clothing, furniture, and household goods. Those tariffs increased costs across the board, forcing many retailers to either absorb the added expense or pass it on to consumers through higher prices. A refund would effectively put some of that money back on their balance sheets.
That doesn’t necessarily mean retailers will suddenly slash prices. More likely, the cash would strengthen free cash flow, improve profit margins, fund share repurchases, pay down debt, or support new investments. Indeed, all these outcomes can create value for shareholders over time. Of course, not every retailer stands to benefit equally.
The refunds would apply only to tariffs collected under the program that were ruled unlawful and only to companies that actually paid those duties. Businesses that shifted production to other countries, negotiated lower supplier prices, or successfully passed tariff costs on to customers may see a much smaller benefit than companies that absorbed the higher costs themselves.
It’s still not over
To be sure, it’s important to keep the ruling in perspective. The decision doesn’t actually eliminate every tariff currently in place. The Trump administration has also pursued additional tariffs under other trade authorities, including Section 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962, which were unaffected by the Supreme Court’s decision and remain in place.
There’s also the question of timing. While the potential refund figure is enormous, businesses won’t receive checks overnight. Additional legal proceedings are still underway, and the appeals process could delay payments. So you should definitely view this as a potential medium-term catalyst rather than an immediate earnings boost.
Still, the size of the opportunity is hard to ignore. A $175 billion refund would represent one of the largest potential cash-back transfers to American businesses in years. Retailers won’t all receive equal shares, but companies with large import footprints could find themselves with stronger balance sheets and healthier cash flow than Wall Street currently expects.
So while talk of tariffs may not sound like the most exciting thing in the world, this ruling is not trivial, and you would be wise to pay close attention to how this all plays out.
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Jeff Siegel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale, Target, and Walmart. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
